Unlike some people, I'm a sucker for a good shareholder's proposal. However, Bill Sjostrom reports on a shareholder proposal that I can't get behind. Apparently a union pension fund went to the trouble and expense of putting forth a shareholder proposal to eliminate Google's dual class common stock regime. The proposal stated, among other things:
We believe this disproportionate voting power presents a significant danger to shareholders. As Louis Lowenstein observed in What’s Wrong With Wall Street (1988), dual-class voting stocks like our Company’s reduce accountability for corporate officers and insiders. In our view, the danger of such disproportionate voting power was illustrated by the recent fraud charges brought against top executives at Adelphia Communications and Hollinger International.
That's pretty harsh. Does Google equal Adelphia? Are Larry and Brin siphoning off money from Google? As Bill points out, the market was extremely conscious of the dual-class common situation back in August of 2004; no secrets here. The pension fund bought the stock with full knowledge of the situation. Unless something has changed to make the situation more "dangerous" than it was previously, then why the proposal? The pension fund seems to think that the voting structure enhances the agency problem between the management and the shareholders of Google, but who's watching the agency problem between pensioners and the pension fund that wastes its money on useless shareholder proposals?
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1. Posted by Gordon Smith on May 15, 2006 @ 9:29 | Permalink
I guess they should have been reading Conglomerate. We were talking about this as soon as Google filed for the IPO.
Not that this has depressed Google's stock price ...
2. Posted by Bill Sjostrom on May 15, 2006 @ 16:27 | Permalink
It's probably motivated by the outrageous salaries the google guys are paying themselves.